Why Refinance your Mortgage?
In the strictest sense, to refinance your mortgage means replacing your current mortgage with another mortgage. In practice, this means that you’ll have to conduct research to reveal your options, compare your current mortgage with your options, and then submit to the standard process used to secure a mortgage if you feel that refinancing is in your best interests.
Reasons to Refinance your Mortgage
Generally, you refinance your mortgage because your new mortgage comes with new interest rates and other borrowing conditions, which can provide you with a more manageable outstanding balance. However, there are also other important benefits to refinancing your mortgage, though not all of them will appeal to all of mortgage-holders out there.
Here are some of the most popular answers to the question of why refinance your mortgage:
- One of the most popular reasons to refinance is the continuous change in interest rates over time. For example, interest rates plummeted in the course of the Great Depression. Someone who had taken out a mortgage prior to the collapse of the real estate market would have been stuck with the high interest rates, unless said individual could refinance his or her mortgage.
- Of course, refinancing your mortgage means that you might also be able to secure better borrowing conditions other than lower interest rates. For example, if you find that your current monthly payment is too onerous, then you may be able to secure a smaller monthly payment in exchange for a longer term. Alternatively, you may choose to reduce the overall cost of your home by shortening your term so as to pay less interest.
- If you are in need of cash with which to start a business, eliminate outstanding bills, or cover some other costs, then refinancing your mortgage can be one of the best solutions out there. This is particularly true if you’ve had your current mortgage for some time, since that means you’ll have more equity built up in your home.
- Managing more than one debt obligation can prove to be a bit of a hassle, which is why some people refinance their mortgages with the intention of consolidating their debts. In short, you refinance your mortgage to get cash, which you then use to pay down your other debt obligations. Using this method, you’ll only need to make the payments on your new mortgage going forward, which can save you both time and frustration.
Refinance Your Mortgage
Of course, refinancing your mortgage has its costs. For example, most mortgages have early repayment fees, which can cancel out the financial benefits of securing lower interest rates. Ultimately, the question of why refinance your mortgage is something that only you can answer, as you are the person best placed to understand your personal needs and priorities. However, never forget that speaking with the experts at Vertuity Mortgage can help you both understand mortgages better and clarify your personal priorities.